From 1977 to 1980, he served in several positions for the United States Department of Energy (DOE): as Director of Energy Research, Acting Assistant Secretary for Energy Technology, and Undersecretary of the Department. In 1978, Deutch published two physical-chemistry papers (in, Combustion and Flame, 1978, vol 231 pp. 215–221 and 223-229) on modeling the mechanism of the Fuel/Air mixture. He served as the provost of MIT from 1985 - 1990. As MIT Dean of Science and Provost, Deutch oversaw the disbanding of the Department of Applied Biological Sciences, including its toxicology faculty.

Deutch fell out of favor with the Clinton administration because of public testimony he gave to Congress on Iraq. Specifically Deutch testified that Saddam Hussein was stronger than he was four years ago and the CIA might never be able to remedy the issue. Clinton replaced Deutch after he had won re-election.[6][7]

Deutch left the CIA on December 15, 1996,[2] and soon after it was revealed that several of his laptop computers contained classified information wrongfully labeled as unclassified.[8] In January 1997, the CIA began a formal security investigation of the matter. Senior management at CIA declined to fully pursue the security breach. Over two years after his departure, the matter was referred to the Department of Justice, where Attorney General Janet Reno declined prosecution. She did, however, recommend an investigation to determine whether Deutch should retain his security clearance.[9] Deutch had agreed to plead guilty to a misdemeanor for mishandling government secrets on January 19, 2001, but President Clinton pardoned him in his last day in office, two days before the Justice Department could file the case against him.[10][11]